CD Equisearch's research report on Deepak Nitrite Ltd
Sorted into basic chemicals, fine & speciality chemicals (FSC) and performance products, DNL’s product portfolio comprises organic, inorganic and fine chemicals - for use in detergents, colorants, paper, agro chemicals, rubber etc.Sluggish overall volume growth (5%) failed to scupper business growth for overall revenues surged by 19.4% in Q4 - markedly improved from 6.1% in Q1- and operating margin rose by some 30 bps. Striking increases in both interest (34.1%) and depreciation expenses (14.3%) scarcely put brakes on PBT - which rose by a stunning 46.5%.
Outlook
Yet backward integration of Roha unit would boost capacity utilization of most propitious fine & specialty chemicals business. Wherefore margins could scarcely remain subdued. We recommend buying the stock with revised target of Rs 295 (previous target: Rs 251) based on 20x FY20 earnings.
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